NOMPU SIZIBA: The founders of the new company Mr Tekkie, who left Tekkie Town – now owned by Pepkor, which was formerly the company Star – say they are going to fight a High Court application made by Pepkor to prevent them from setting up shop. They are looking to open their first store in Cape Town next month. To tell us more about the saga I’m joined on the line by Bernard Mostert, one of the founders of the new Mr Tekkie, and soon to be its CEO.
Thanks very much for joining us, Bernard. You’ve resolved to fight this application, but what is the basis, as you understand it, on which Pepkor is trying to prevent you guys from setting up shop?
BERNARD MOSTERT: Nompu, thank you. I enjoyed listening to your and Ettienne’s conversation earlier on the show [on the RMB Business Confidence Index] because that is very close to what we are doing now – starting a business and investing in the country. If you look at why we are doing it, we are doing it because we see an opportunity that exists.
We previously were with management and others of Tekkie Town. We sold that into Steinhoff in a deal that wasn’t fulfilled, in that we were never paid. Steinhoff then became a defining event in South Africa. So we have a situation with a lot of people being victims in terms of what happened there. We are fortunate that we can react to it, and we have reacted to it in two ways. We took a legal fight to have our transfer action cancelled when we resigned from the contract.
Then secondly, because we understand that that will take time, we also said, well, we can start a business – and one day we will have two businesses. So that is it. Pepkor does not like this. Even though they have said that we are less than 1% of their business, etc., they are now investing a lot of money and time into fighting [for] a restraint of trade, which we are going to oppose. So that’s the summary.
NOMPU SIZIBA: Tell us a bit about the founders of the new firm. Do they include some of the old employees who took flight from Pepkor when you guys left? And, since many of you who have founded this new firm were essentially out of pocket from the experience, having sold your interest in Tekkie Town to Pepkor or Steinhoff, and having taken a decision to leave the company with immediate effect, how are you going to be funding this new venture?
BERNARD MOSTERT: First of all, to answer your question, it includes a lot of former colleagues. It also includes a few new colleagues. It doesn’t include everyone who left Tekkie Town, because some people were interested in pursuing other opportunities and did so.
Again, to touch on your conversation earlier with Ettienne about the success of South Africa, the one thing that we’ve seen over the last 20 years in South Africa is that the resilience of South Africans to take ownership of something that they love doing is brilliant. We saw it across the country, in towns and so forth. I’m privileged and proud to be flanked by people today who will build this business alongside us.
How are we going to fund it? I think we are very, very blessed to have one of the most fiscally-disciplined people whom I know as our key investor, and that’s Braam van Huyssteen. Braam knows the value of R1. It’s one of the reasons why he alienated the Pepkor management – because he didn’t like what he saw there. Braam has committed a line of credit or investment of R500 million for us to start this venture, in which more than 100 people will be shareholders.
NOMPU SIZIBA: Wow. So what will Mr Tekkie’s value proposition be, and how vastly different an offering will you have from your previous employer, given the fact that you guys actually once owned Tekkie Town before, and it no doubt still runs based on your original ideas?
BERNARD MOSTERT: That’s incorrect, because it no longer runs according to the original ideas any more.
NOMPU SIZIBA: Okay.
BERNARD MOSTERT: I think that will come out in time. But to differentiate our business and what we are going to offer, we do believe that there’s a space in the South African retail landscape, and so do a lot of our suppliers and landlords, etc., to offer what we call a broader offering – something that allows people to define themselves not only by the brand that they wear on their feet, but also the clothes that they wear, how they wear them, and the accessories they wear with them. That’s not something that we ever did in Tekkie Town, and that’s new territory for us. But we are fortunate that there are a lot of exciting suppliers on the scene that we are going to work with to bring to South Africans a concept that we believe will be based on how you look, but more about how we create experiences for you with your wardrobe.
NOMPU SIZIBA: So now, assuming your coast is cleared once you’ve challenged Pepkor in terms of your being able to go ahead and set up shop, what’s the immediate plan? I hear you want to open an outlet first in Cape Town. Then what sort of footprint – pardon the pun – do you want to develop from there?
BERNARD MOSTERT: Our first door will open at the end of October and then we will follow with another 11 to 14 stores in November. And then from February next year we will roll out based on what we perceive our demand to be. We hope that we can invest prudently to build it up into a place where we ultimately are available to reach most South Africans who want to make use of our story.
NOMPU SIZIBA: You did touch on it earlier in the conversation. We know that you’ve decided to take a two-pronged approach to what’s happened to you. You’ve decided to set up a new shop and see where that takes you. Of course, in the meantime you are fighting against Pepkor in relation to the injustice that was done against you. Just refresh our memories as to the legal action that you took, and what the progress is thus far.
BERNARD MOSTERT: The first legal action that we took was against Steinhoff in terms of cancelling the contract that we concluded with Steinhoff, which saw the shareholding in Tekkie Town swapped for shares in Steinhoff that could not be traded. That case is ongoing.
The second relates to an earn-out agreement that we entered into, in which we would have managed a basket of loss-making stores within Pepkor, and we would have been rewarded if we could have turned them around.
Then there are numerous labour cases around that because, following the Steinhoff debacle and the exit of the Steinhoff executives and the return of the Pepkor executives, it was made impossible for us to do our jobs and it was clear that we no longer had the support of the senior management of the business. We will pursue breach-of-contract claims against Pepkor for those actions.
NOMPU SIZIBA: Okay, Bernard. All the very best with the new venture and thank you very much for keeping us updated on what’s happening.